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Global Markets Dip After Greek Referendum Global Markets Dip After Greek Referendum
(35 minutes later)
PARIS — Global stock markets mostly dropped on Monday but did not plunge, as investors reacted with muted dismay to the results of the Greek referendum and showed nervousness about steep declines in China’s stock market over the past three weeks. PARIS — Global stock markets mostly dropped on Monday but did not plunge, as investors reacted with muted dismay to the results of the Greek referendum and showed nervousness about steep declines in China’s stock market over the past three weeks.
Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said the relatively subdued reaction showed “the market has gotten used to the strange things that have been going on with Greece.” Wall Street shares fell less than a percent, a smaller drop than some had feared. European shares fell around 2 percent.
He said it also reflected investors’ confidence that Mario Draghi, the president of the European Central Bank, would take whatever action was necessary to soothe tensions at a moment of crisis. Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said the relatively subdued reaction showed “the market has gotten used to the strange things that have been going on with Greece.” He said it also reflected investors’ confidence that Mario Draghi, the president of the European Central Bank, would take whatever action was necessary to soothe tensions at a moment of crisis.
“That’s preventing markets from going down too much,” Mr. Gijsels said.“That’s preventing markets from going down too much,” Mr. Gijsels said.
The Dow Jones industrial average fell 43.49 points, or 0.25 percent, to 17,686.62, the Standard & Poor’s 500-stock index lost 7.96 points, or 0.38 percent, to 2,068.82 and the Nasdaq dropped 17.27 points, or 0.34 percent, to 4,991.94. The Dow Jones industrial average fell 46.53 points, or 0.26 percent, to end at 17,683.58. The S&P 500 lost 8.02 points, or 0.39 percent, to 2,068.76, and the Nasdaq Composite dropped 17.27 points, or 0.34 percent, to 4,991.94.
In Europe, Germany’s DAX fell 1.5 percent while the CAC-40 in France fell 2 percent. The FTSE 100 index of leading British shares was 0.8 percent lower.In Europe, Germany’s DAX fell 1.5 percent while the CAC-40 in France fell 2 percent. The FTSE 100 index of leading British shares was 0.8 percent lower.
The euro was down 0.4 percent to $1.1084. The dollar slipped 0.1 percent to 122.44 Japanese yen. The euro was 0.54 percent weaker against the dollar, at $1.1053.
In Asia on Monday, the Shanghai market jumped sharply in early trading as the Chinese government poured money into brokerage firms to help them and their customers buy shares. The market leapt 7.8 percent at the start, but it surrendered half of those gains in the first 10 minutes of trading and closed 2.4 percent higher.In Asia on Monday, the Shanghai market jumped sharply in early trading as the Chinese government poured money into brokerage firms to help them and their customers buy shares. The market leapt 7.8 percent at the start, but it surrendered half of those gains in the first 10 minutes of trading and closed 2.4 percent higher.
The smaller Shenzhen stock market also started strongly but fell 2.7 percent by the end of trading. The smaller Shenzhen stock market also started strongly but fell 2.7 percent by the end of trading. The Nikkei 225-share index in Japan closed 2.1 percent lower.
Bonds in Italy, Portugal and Spain, seen as the most exposed to any potential contagion from the Greek crisis, all fell, with their yields, which move in the opposition direction of prices, spiking higher — indicating that those governments’ borrowing costs could rise.Bonds in Italy, Portugal and Spain, seen as the most exposed to any potential contagion from the Greek crisis, all fell, with their yields, which move in the opposition direction of prices, spiking higher — indicating that those governments’ borrowing costs could rise.
In contrast, yields on British, German and United States government bonds fell, as investors turned toward assets they considered safer. The yield on the 10-year Treasury note fell to 2.31 percent from 2.39 percent late Thursday. In contrast, yields on British, German and United States government bonds fell, as investors turned toward assets they considered safer. Yields on 10-year Treasuries hit 2.29 percent.
The major exception was in yields on Greek bonds, which have been little traded since the country’s financial markets were closed last week. The price of the Greek two-year crashed, to leave an astonishingly high yield of 48 percent — almost 15 percentage points higher than on Friday. That is in stark contrast to a yield of less than 1 percent for comparable German debt.The major exception was in yields on Greek bonds, which have been little traded since the country’s financial markets were closed last week. The price of the Greek two-year crashed, to leave an astonishingly high yield of 48 percent — almost 15 percentage points higher than on Friday. That is in stark contrast to a yield of less than 1 percent for comparable German debt.
The Greek bonds’ movement has little practical effect on the government’s borrowing costs, as the country has been shut out of the capital markets and has issued no new bonds lately. But their plummeting value further undermines the Greek banks, which are the biggest private holders of the country’s sovereign debt. The Greek bonds’ movement has little practical effect on the government’s borrowing costs as the country has been shut out of the capital markets and has issued no new bonds lately. But their plummeting value further undermines the Greek banks, which are the biggest private holders of the country’s sovereign debt.
And because the Greek banks use their government’s bonds as collateral against loans from the European Central Bank, the plunge could make it even more difficult for the central bank to agree to continue lending to the banks.And because the Greek banks use their government’s bonds as collateral against loans from the European Central Bank, the plunge could make it even more difficult for the central bank to agree to continue lending to the banks.
The European Central Bank was to discuss its response to the latest developments later on Monday.The European Central Bank was to discuss its response to the latest developments later on Monday.
Addressing the possibility that the central bank might force Greece’s hand before European political leaders had been able to formulate their own response, the French finance minister, Michel Sapin, on Monday told Europe 1 radio that the European Central Bank “must not cut” its support for Greek banks.Addressing the possibility that the central bank might force Greece’s hand before European political leaders had been able to formulate their own response, the French finance minister, Michel Sapin, on Monday told Europe 1 radio that the European Central Bank “must not cut” its support for Greek banks.
Oil prices fell as much as 3.2 percent early Monday, as traders placed bets that recent events could lead to slower global economic activity and weaker demand. Brent crude, a benchmark, fell below $60 a barrel for the first time since mid-April. The benchmark U.S. contract tumbled $3.64 to $53.30 a barrel in New York. U.S. oil prices fell the most in three months after Greece’s rejection of the debt bailout terms and after China’s measures to support its stock markets.
Bond prices rallied in Australia, and gold and silver prices climbed, as investors sought safety in response to uncertainty about whether Greece would stop using the euro and about whether mainland China’s economy would slow after investors there lost $2.7 trillion in the stock market over the past three weeks. Also taking a toll on the energy market were talks between Iran and world powers to meet a July 7 deadline on a nuclear deal. That deal could release more oil into already oversupplied markets if sanctions on Iran are eased.
The Nikkei 225-share index in Japan closed 2.1 percent lower, and the Kospi in South Korea dropped 2.5 percent. The stock market in Australia, where mining companies are heavily dependent on Chinese demand, finished down 1.1 percent. Benchmark Brent crude declined 5.8 percent, down $3.51 a barrel at $56.82.
Kymberly Martin, a currency strategist at the Bank of New Zealand, said that the Greek vote and China’s stock market decline both tended to have similar effects on currencies and stock markets.Kymberly Martin, a currency strategist at the Bank of New Zealand, said that the Greek vote and China’s stock market decline both tended to have similar effects on currencies and stock markets.
“It’s very difficult to disentangle what proportion is the eurozone and what proportion is China,” she said. “Probably both factors are affecting the market in the same direction.”“It’s very difficult to disentangle what proportion is the eurozone and what proportion is China,” she said. “Probably both factors are affecting the market in the same direction.”
But other economists saw the events in Greece as more influential.But other economists saw the events in Greece as more influential.
“It’s more Greece, but those China concerns are also there,” said Richard Grace, a currency and fixed-income strategist at the Commonwealth Bank of Australia.“It’s more Greece, but those China concerns are also there,” said Richard Grace, a currency and fixed-income strategist at the Commonwealth Bank of Australia.
He also questioned whether the sharp gains for Australian bonds would endure, saying that those bonds often jump in value in response to overseas events that prompt investors to seek safety. But the jumps are often transitory, he noted, and recede after European and American markets begin trading.
E. William Stone, the executive vice president and chief investment strategist at the PNC Asset Management Group in Philadelphia, said that most investors had been expecting a yes vote on the Greek referendum. Instead, with more than 90 percent of the vote tallied, more than 60 percent of the voters had chosen no.E. William Stone, the executive vice president and chief investment strategist at the PNC Asset Management Group in Philadelphia, said that most investors had been expecting a yes vote on the Greek referendum. Instead, with more than 90 percent of the vote tallied, more than 60 percent of the voters had chosen no.
“I won’t be surprised if we get some larger sell-offs” as the day progresses, he said.“I won’t be surprised if we get some larger sell-offs” as the day progresses, he said.
Unlike Ms. Martin, he said that Greece would be the dominant influence on markets, particularly in Europe and the United States. While the Shanghai stock market has lost more than a quarter of its value since June 12, it is still up nearly 80 percent from a year ago.Unlike Ms. Martin, he said that Greece would be the dominant influence on markets, particularly in Europe and the United States. While the Shanghai stock market has lost more than a quarter of its value since June 12, it is still up nearly 80 percent from a year ago.
“It almost seems like the Chinese authorities are overreacting,” he said.“It almost seems like the Chinese authorities are overreacting,” he said.
On Monday, China’s state-run news media issued a volley of commentaries declaring faith in the government’s ability to restore confidence to the stock market.On Monday, China’s state-run news media issued a volley of commentaries declaring faith in the government’s ability to restore confidence to the stock market.
“After the storm, comes the rainbow,” said a commentary in People’s Daily, the Communist Party’s leading newspaper. Investors were mistaken to worry about the level of debt behind the rise in stock prices, it said. “After the storm, comes the rainbow,” said a commentary in People’s Daily, the Communist Party’s leading newspaper. Investors were mistaken to worry about the level of debt behind the rise in stock prices, it said. “What the broad numbers of investors need at this instant is confidence, not panic,” it said.
“What the broad numbers of investors need at this instant is confidence, not panic,” it said.
In Hong Kong, where shares closed 3.2 percent lower, investors appeared to be paying considerably more attention to China than Greece.In Hong Kong, where shares closed 3.2 percent lower, investors appeared to be paying considerably more attention to China than Greece.
“The Greek referendum should not influence too much the Asian stocks — the actions of China, with its huge economy, will have more impact,” said Roger Lam, a 63-year-old retired office worker, as he watched computer monitors at a downtown brokerage. “Anyone who says China does not have the ability to hold up the stock markets in China is a fool. They have just not seen the mighty power of the Chinese government.” “The Greek referendum should not influence too much the Asian stocks — the actions of China, with its huge economy, will have more impact,” said Roger Lam, a 63-year-old retired office worker, as he watched computer monitors at a downtown brokerage.
“Anyone who says China does not have the ability to hold up the stock markets in China is a fool. They have just not seen the mighty power of the Chinese government.”